Retirement’s Shift: Different Stages for Different Ages

The UK population is ageing. Data published by the ONS in 2015 show that the UK population of over 65s has grown by 47% in the last forty years to make up nearly 18% of the total. And the number of people aged 75 and over has increased by 89% in the same time period. The most common age at death was 86 for men and 89 for women in 2011–2013.

Assuming retirement is taken at 65, the average retiree has 18 to 20 years ahead of them. During this time they may go from good health to poor, or from complete independence to full time care. Exactly what will happen over the next two decades is uncertain. However, their retirement is unlikely to remain static and will be comprised of different phases, reflecting this time of great change in their life.

A dynamic retirement model

Today’s typical retirement may be broken down into four distinct stages:

Pre-retirement. Retirees may ease themselves into retirement by working reduced hours at their current job. Depending upon individual circumstances, they may cut back their hours in their early to mid-60s. They’ll continue to contribute towards their pension and pay for life cover.

Bucket-list years. At about 68 years old, people leave their employment to do all the things that were difficult when they were working. Travel is likely to rank highly amongst their plans; 82% of over-60s cited travel as a goal in early retirement.* Their lifestyle may be quite expensive and they’ll need a lump sum to fund significant purchases.

Traditional retirement. At about 73, the retiree starts to slow down and her lifestyle starts to resemble the classic ‘pensioner’. This group is unlikely to work, but will take part in leisure activities. Living expenses will be lower than in the previous phase.

Care years. Later on, from about 82 years onward, the likelihood of poor health and loss of independence increases, and the retiree may need full or part-time care; in 2009, over two-thirds of people over 85 had a disability or longstanding illness*. Living expenses will be modest, but care expenses could be high, with uncertainty over how long remaining funds will have to last.

Retirement is no longer a single life event with a one-time decision on how to use accumulated funds at 65 years old. Rather, it can be viewed as a set of discrete retirements, with each phase demanding its own level of income.

Meeting the needs of today’s retiree

The freedom of choice now available to those at retirement age has left many people with access to considerable capital – but they’re unsure what to do with it.

At Sapiens, we believe that an open-minded view of a modern, dynamic retirement presents an opportunity for providers to step up and deliver much-needed support to retirees. Those providers who have developed a portfolio of products to meet clients’ changing financial needs will have an advantage. In addition, those who have a policy administration system that allows for product flexibility and rapid new product generation will be in the best position to meet the high expectations of today’s retiree.

Want to know more?

Sapiens International Corporation (NASDAQ and TASE: SPNS) is a leading global provider of software solutions for the insurance industry. Sapiens ALIS is our flagship solution- a life & pension insurance software designed to enable insurance providers to quickly and efficiently address the challenges of a highly regulated and increasingly competitive marketplace. Contact me for more information.

*Source: Department for Work and Pensions

Dave Smith

Dave Smith possesses over 30 years experience within Life & Pensions and 20 years working for a UK Life and Pensions provider in a range of roles across the full suite of product types.